Serving the Quantitative Finance Community

 
User avatar
master

Estimating Half-life

February 12th, 2002, 12:08 pm

I am using the Ornstein-Uhlenbeck mean-reverting process and employ a discretization method which enables me to calculate the mean reverting parameter explicitly using daily data on stock indices.

My question is, what is the formula to calculate the half-life of mean reversion? Does it depend on the model or is it simply found as ln(2)/mean-reverting param? And how can I transform this to half-life in annual terms?